Platform Leadership

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Platform Leadership

• T-109.5410 Technology Management
• 15.11.2005
• Eino Kivisaari
• Researcher, M.Sc.
• TML / SimLab / Technology Management

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• We are tied to innovations by others to make our
  
• innovation valuable. If we do an innovation in
  the
• processor, and Microsoft or independent software
• parties dont do a corresponding innovation, our
• innovation will be worthless. So, it really is a
• desperate situation for us.
• David B. Johnson, Intel Architecture Lab

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Product Platform Strategy

• Platform is an architecture of the common
  elements implemented across a range of products
• Defining technology Key element(s) of the
  platform
• Dictates life cycle, capabilities, limitations
• Is based on companys core competence
• Difficult to copy by competitors
• The choice of defining technology is perhaps the
  most critical strategic decision that a hi-tech
  company makes
• What if platform elements are provided by
  different companies?

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Platforms, Segments, Products
Unique product elements and common platform
elements of a product line
Segment A
Segment B
Segment C
Element A
Common Platform Elements
Element B
Element C
(McGrath 2001)
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Benefits of Platform Strategy

• Enables rapid and consistent product development
• Encourages a long-term view on product strategy
• Operational efficiencies
• Reduced manufacturing costs
• Reduced design costs
• Easier Marketing and Support
• Are these valid also when elements are provided
  by different (competing collaborating)
  companies?

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Annabelle Gawer and Michael A.
CusumanoPlatform Leadership How Intel,
Microsoft and Cisco Drive Industry Innovation
Harvard Business School Press 2002 Available
at HUT library 20-30 in various webstores
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Platform Leadership

• Core Products vs. Complements
• Cars / Tires
• Computers / Software etc...
• Modularity of Complex Products
• More modularity in developed industries
• This is the direction where mankind is going
  specialization
• Balance of Power?
• Who conducts the orchestra?

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Platformed High-Tech World

• Increasing interdependency of products and
  services
• Ability to innovate by more actors than ever
• ? Platform leaders must solve three problems
• Maintenance of the integrity of the platform
• With regard to future technological innovation
  and the independent product strategies of other
  companies
• Platform evolution
• How to permit platforms evolve technologically
  while maintaining compatibility with older
  components
• Gaining and sustaining platform leadership

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Four Levers of Platform Leadership

• The authors analyzed a variety of organizations
  (Intel, Microsoft, Cisco, for example) and
  discovered four distinct but related levers of
  platform leadership
• These four levers can help managers in both
  strategic formulation and implementation

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Lever One Scope

• Deciding the scope of the company is the most
  important decision Which complements to make
  in-house and what to leave to outsiders?
• Companies that desire to become platform leaders
  need to determine how dependent they are on
  complements
• Platform producers should avoid developing their
  own complements if they lack financial or
  technical capacity to compete in the relevant
  markets
• However, as a rule of thumb, platform producers
  should have in-house capability, not only for
  complement production, but to serve as healthy
  competition for outsiders

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Lever Two Product Technology

• Degrees of modularity and openness
• Product architecture can have a large impact on
  the structure of an industry and the types of
  follow-on innovation
• Product architecture determines who does what
  kind of innovation and how much investment in
  complementary products will occur outside the
  platform-leader organization
• Leading companies guard their core technology but
  utilize tools such as modular architectures and
  disclosure of interfaces to ensure the supply of
  complementary products

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Lever Three External Relationships

• Collaborative vs. competitive
• For long-term effectiveness, platform leaders
  must follow two goals simultaneously
• Search for consensus with complementors about
  technical standards and how they interface with
  products
• Show the way by providing new complements
  (produced in-house), if this is seen to be
  necessary
• Consensus needs to be forged by one company
  driving the process
• Platform leaders should be industry enablers.
  They should help others innovate in better ways
  around the platform.
• Platform leaders should not unnecessarily step
  out of their product boundaries into that of
  their complementors
• Leaders can reduce external tensions with a
  humble approach and by acting on behalf of the
  entire industry

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Level Four Internal Organization

• Coping with internal external conflicts
• Platform producer must generate an internal
  organization that enables it to manage
  complementor relationships with ease
• Therein lies the challenge, as sometimes groups
  within a firm compete with complementors
• It is crucial to communicate the multiple goals
  to the whole firm and generate a process that
  helps resolve conflicts
• Separation of competing groups ? outsider
  companies become more willing to entrust
  personnel with information
• Platform leaders can appear neutral if they
  establish different groups maintaining different
  roles

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Case Intel

• Basic problem People dont buy processors, but
  PCs
• Well... some people do ?
• Multibillion-dollar investments in processor
  design
• How to make sure that demand for the
  processors stays grows?

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Case Intel History

• In 1979 IBM decided to develop a new PC to
  compete with Apple
• Intel 8088 Processor
• Microsoft DOS (Disk Operating System)
• Soon after, PC-Compatibles emerged
• No exclusive contracts were made
• IBM allowed this, which speeded up production,
  commerialization and adoption of PCs worldwide
• PC-AT in 1984
• ? demand exploded for IBM PC-AT and clones

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PC Industry Evolution

• Decline in vertical integration
• IBM, DEC, Univac, Wang started to lose leadership
• Specialists started to take over
• Microsoft, Intel, Motorola

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Case Intel

• Intels big entry thanks to IBM, but
• PC-AT architecture started to feel like a tight
  shirt
• Intels processors developed at a fast pace
• Biggest problem
• ISA data bus (Industry Standard Architecure)
• Very slow internal data bus for graphics, storage
  etc.

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The Rush Hour of BusesISA / MCA / EISA / VESA /
PCI

• In 1980, MCA bus by IBM (MicroChannel
  Architecture)
• Compaq EISA (Extended ISA)
• No real performance improvements, industry stayed
  with ISA for years

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Lack of Platform Leadership

• Intel was disturbed by the lack of leadership
• No one was able to advance the overall platform
• Unclarity of mandate how should do it?
• Standards Committees (a VESA graphics bus was
  actually developed)
• Old Leaders
• or Intel?
• The PC platform was not moving fast enough for
  Intel

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Intel Architecture Lab (IAL)

• Created in 1991
• Architects for the open computer industry
• 550 engineers in 2001 (none of which work on
  designing new microprocessors)
• The mission of Intel Architecture Lab
  To grow the overall market

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PCI Initiative

• The PCI bus, IALs first project in 1991
• Transformation of the internal architecture of
  the PC
• Goals Speed, Modularity, Openness, Space for
  growth
• Advancing the whole PC industry
• What could a PC become, if the best was made out
  of it?

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Intel takes lead with PCI

• A big conceptual step for Intel
• from providing processors
• to architecting the whole platform
• Indecision within Intel
• Big investment
• Mandate was unclear, a too presumptuous move?
• Success factors
• PCI was free and open to everyone
• IBMs failure with MCA, an attempt towards
  verticality
• Winning over other firms, rallying collaborators
• Thinking ahead avoiding lock-in to certain
  processor generations

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PCI Chipsets

• Chip sets had to be redesigned with every new
  processor ? expensive slow for OEMs
• To convince everybody, Intel put its own skin in
  the game
• Mass production of PCI chipsets
• Big players went along because they wanted to
  take advantage of latest Intel chips quickly
• Intel starts making motherboards
• Big OEMs problem How to differentiate?

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• To a large extent, PCI set the tone for other
  initiatives Intel realized through this
  experience that, when we set out to do so, we
  can move the industry in some useful direction.
• Dave Carson, Intel Architecture Lab

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USB

• USB initiative began in mid-1990s
• Serial connectors for peripherals had become a
  serious bottleneck
• Intel had the vision and the technology, and this
  time also the courage from the start
• Goal making the best out of PC computers
• and growing the demand for Intel processors,
  of course

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Intels USB Strategy

• To avoid confusion in the market
• Add-on cards
• Ethernet-connectivity
• Parallel port
• Different kinds of software
• Intel wanted a better way to hook to a PC
• Hardware specification for USB
• Software specification
• Operating system support
• Open interface, everybody competing, let the best
  innovation win

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Building Momentum Speed

• Consortiums
• Rabbits (USB Logitech, Microsoft)
• SIG (Special Interest Group)
• PCI, 5 members Intel, DEC, Compaq, IBM, NCR
• USB, 7 members Intel, DEC, Compaq, Microsoft,
  IBM, Nortel, and NEC
• Only a few participants ? fast decisions

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Intel IPR Strategy

• PCI, AGP, USB No fees whatsoever
• However, Intel required that anyone who used
  their IP had to make their related IP open as well

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Intel PlugFests

• Compliancy Workshops
• 100-200 companies attended
• Vendors could test interoperability of their
  products (in a conference hotel somewhere in the
  US)
• Helped in creating good PR for the platform
• Goodwill Agreement participants should not use
  information gathered in PlugFests against their
  competitors

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Enabling Tools

• Software Development Kits (SDK)
• Device Development Kits (DDK)
• Software Libraries etc.
• Benefits
• Faster product development
• Helped in creating momentum
• Lowered entry barriers for complementors
• Fostered innovation
• Made the overall cake bigger for everyone

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• We think one of our core compentencies is that
  we are a trusted partner for almost everybody in
  the industry. We can talk to the graphics groups
  competitors openly about their products and about
  our specification, and they trust that we honor
  that. But you cant just mandate trust. You have
  to earn it.
• Craig Kinnie, Director, Intel Architecture Lab

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Conflicts, Roles, Policy

• Intel played on many fields at the same time
• Intels roles
• Industry enabler (expanding the whole pie)
• Neutral-broker (IAL promotes public interest)
• Profit-seeking (eg. processor manufacturing)
• competition with complementor that IAL is
  supporting
• Many roles ? Separate internal groups
• a powerful strategy, when conflicting agendas
  exist
• internal external debate (can be fruitful)

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Alternative Strategies

• Cisco
• Aquire and Assimilate Complements and Substitutes

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Case Cisco

• Strategy Aquire Assimilate
  Complements and Substitutes
• Internet Router Company
• Defining TechnologyIOS (Internetworking
  Operating System)

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Case Cisco

• Huge growth in annual sales
• 1991 70 million
• 1994 1 billion
• 2001 22 billion
• This was not done alone
• Internet browsers by Netscape Microsoft
• High-performance servers by Sun
• All applications developed for the Internet

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Case Cisco

• A platform leader with 80 market share in core
  router products
• Technology was based on open industry standards,
  distinction came from enabling interoperable
  networking between routers and a wide variety of
  other types of networking and communications
  technologies

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Case Cisco

• Cisco faced more competitors
• 3Com, Lucent, Nortel, Siemens, Fujitsu
• In early 2000 Cisco started losing sales to
  Juniper Networks
• Competitors started being strong in niche markets
  with advanced products

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Case Cisco

• Cisco strategy
• Providing complete solutions, a one-stop-shop
  for networking
• Structured aquisition of pieces needed for the
  puzzle
• Driving industry standards ? overall growth
• Form alliances and partnerships

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Cisco Product Debuts

• 1986 Routers
• Dial-in access servers
• LAN Switches
• WAN Swithces
• Hubs, Firewalls, Caching engines
• Cable boxes, cable head-ends
• DSL Head-ends
• Internet Phones
• Home modems
• Wireless LANs
• IOS all these products one-stop-shop

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Platform Leader Wannabes

• Palm Handheld Computing
• Fighting a giant (Microsoft / PocketPC)
• NTT DoCoMo Wireless Content
• Internationalizing a successful domestic platform
  (iMode)
• Linux Open Source Software
• Relying exclusively on external development and
  open standards

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Summary

• Companies that possess keys to popular technology
  cannot afford to live in a vacuum
• Companies that fail to innovate or have others
  innovate will quickly find them themselves
  outmoded and obsolete
• Platform thinking forces managers to consider
  entire industry
• Platform leaders must maintain incentives for
  third parties to produce complements
• and help them do so
• Platform leadership is a strategy of
  interdependence
• A vision of a business ecosystem
• Platform leadership does not happen by accident

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And then for something totally different

• Post-Graduate Studies at HUT
• Courses, seminars, books, methodology...
• 70 op (45 ov) courses, plus a thesis
• T012Z Telecommunications Managementpost-gr.
  major (T124, Professor Riitta Smeds)
• Working as Researcher
• Research projects, Teaching, Writing,
  Conferences, Studying, Collaboration